Construct a multiple regression using CPI, as a measurement of inflation, how US inflation from 1970 to 2020 is influenced by capacity utilization, Money supply M1, Money supply M2, and Unemployment rate. Reshape the data as yearly data by averaging 12-month data for each year from 1970 – 2020.
Consider you are an analyst working for the company. You need to provide the estimation and analysis for the pricing department to aid their pricing strategy for future products. So you created the analysis report using the following guidelines.
Using the attached raw data:
1. Construct a multiple regression using CPI, as a measurement of inflation, how US inflation from 1970 to 2020 is influenced by capacity utilization, Money supply M1, Money supply M2, and Unemployment rate.
Reshape the data as yearly data by averaging 12-month data for each year from 1970 – 2020.
2. Write down the estimated regression model equation. Using the model equation, estimated the CPI value using the 2021 January value for all independent variables. Then, compare and discuss the actual 2021 Jan CPI data with the estimated CPI from your regression output.
3. Discuss R^2 and Adj R^2.
4. Do the overall model test and individual t-test. Interpret the result.
5. Discuss multicollinearity and collinearity using the appropriate outputs.
6. Do all assumption tests and error analyses. When you discuss, refer to which output you are using to analyze for which assumption.
7. Analyze the residual to discuss unusual observations, outliers, and high leverage value.
8. Based on your analysis, would you suggest a different model? If yes, show your new model in an Excel file and copy and paste it into your answer paper.
You should submit the analysis paper and Excel file that shows all reshaped data and outputs.
Label your tap/sheet with an appropriate name in your Excel file.
For the answer to the above questions in your analysis report, copy and paste the appropriate outputs in your answer section so that I can see which output you used to analyze what.
Requirements: answer all questions
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